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Monthly Archives: February 2015

≈ Comments Off on Buyers from neighbouring cities prefer South Chennai

Chennai is attracting buyers from the neighbouring cities of Tirupur, Madurai and Coimbatore, who prefer to buy homes in the southern part of the city, due to the infrastructure available here.

Luxury has seen progressive number of buyers over the years and in places such as Anna Nagar, prices inclusive of land price can even go up to Rs 15 crore here. Such properties do get tenants though not buyers, and much of the crowd from Coimbatore, Madurai, Tirupur and even Kochi are now moving to Chennai.

Data also suggests that among the top preferred destinations for sale and rent, a majority of them are in South Chennai.

The student population from nearby colleges also take up flats in and around Nungambakkam on sharing basis so the rental is divided and they do not compromise on lifestyle.

The rental market in premium localities is better than the capital market. Tenants do not hesitate to spend Rs 30,000-50,000 monthly if the amenities are good. These localities are close to the city, have easy accessibility to their workplaces and also reflect their aspirations.

These buyers, tenant profile consists of local businessmen. Depending upon their business, they decide to rent or buy in Chennai. Popular commercial area is T Nagar and its vicinity.

Re-development is also opening up stock in KK Nagar, Besant Nagar, Indira Nagar and Shastri Nagar. Close to 30 years back, the Tamil Nadu Housing Board had developed these areas which require renovation and repairs today.

North Chennai also seems to be picking up with small investors. This helps them to enter the market with lower entry costs.

Developers are hoping to cash in on a a scheme that guarantees rentals to attract buyers looking at a second home as an investment. Guaranteed rental schemes offer rent payments to buyers for two to three years from the date of possession, thus lowering the pressure on EMIs.

This is encouraging for second home buyers and NRIs looking at investment purchases, as it reduces the hassle of finding a tenant and the problems associated with tenancy. Maintenance too is handled by the builder, making it a nearly carefree investment.

The guaranteed rental is given to buyers not as a monthly payment, which is what real tenants would give, but as an upfront discount. For example, if a project offers a five-year rental agreement, for a Rs 55 lakh apartment, it is calculated at Rs. 12,000 per month, the developers will reduce Rs. 7.2 lakh from the cost of the apartment upfront, thus reducing EMIs by at least Rs. 5,000.

In turn, developers sign tenancy agreements with MNCs and collect rent directly from them. Steady possession for five years increases the value of the property. Buyers who don’t want the scheme have the option to refuse the discount and find tenants by themselves.

The downside is that if projects are delayed, developers might back out of the agreement. Also, buyers get a flat rent amount upfront, with no annual increase factored in over the five years.

Guaranteed rental is common practice in commercial property, where builders lease the property before sale to a second party. Many IT parks, for instance, have this scheme. It shows real demand and assures guaranteed returns in the long term. But when it comes to residential property, you need to gauge if it is, in fact, real occupancy. If not, it is just another name for a discount. Buyers should pick a property only if they believe they can live there themselves.

Dressing up living and commercial spaces has assumed importance in today’s urban life. The persona of the owner reflects in the walls and ceilings of the spaces they use. Institutions would want their spaces to convey their spirit, aims and objectives to the visitors.

Metro cities in India seek the services of a host of designers, artists, visualisers and décor experts to embellish their interiors as well as exteriors. A good number of art studios today provide services to enliven the spaces in homes, industries, institutions and commercial firms. The artists in turn endow them with traits the corporates or their inmates cherish for a lifetime.

This does not mean only work of art, like paintings and colors, but it can be metalwork, pottery — clay or glazed porcelain — or customised installations; geometric shapes in walls or art sculptures.

A Buddha frieze or colorful pieces of glass joined together can emphasis the ambiance to create a more spiritualistic or romantic or even a truly corporate environment, to the client who walks in.

Certain times murals and flags help send out a message about emphasised relationship building among offices in different nations, that a firm has business relations with.

Use of glas in interiors is still prevalent since it enhances the visual space by enlarging it. The more affluent decorate their spaces with coral art pieces and crystal chandeliers.

Vetropole’ bubbled glass pillars that transfer light from outside without compromising on privacy of the interiors are here too. Vetropole glass pillars are used for staircase purposes. A 70 mm diameter and 8 ft. high glass column weighs around 35 kg. Glass rods serve as banister columns.

Fibre reinforced plastic (FRP) has joined the fray of materials that go into the decorative arts. FRP carries elegant mahogany timber finish and has come to be widely used for gates, wall cladding and garden benches as it is totally water resistant.

While many developers in their advertisements promise 75% garden and 25% built triggering our imagination about living amidst greenery, in reality we could be living in a crowded high-rise concrete tower with no green outside the house. The assured green could be in one large parcel at one part of the master plan, with no benefit to every living room of an apartment in the complex.

This makes us wonder if the high rises are actually eco-friendly or not. Many green buildings have a certification of compliance as per the guidelines laid out by the certifying agency.

For the developer, utilising the maximum permitted built area called floor area ratio (FAR) is important for return of investment, so he would utilise the FAR equally, high-rise or low-rise. The major difference would be in the ground coverage, where the option of tall tower block would leave more ground area unbuilt, claiming it to be garden – a unique selling point.

In the architects’ professional circles, comparison between low-rise high density development and high-rise high density development has been an age old debate, with both the theories attracting their supporters.

If energy consumption and sustainability becomes the yardstick, high-rise apartments tend to raise more questions. They demand on site management, mass concreting, precise execution and an efficient supply chain to ensure smoother project completion, demanding hi-tech practices, multiple high speed elevators during and after construction with uninterrupted power.

Due to the extra efforts required in lifting materials and moving people to higher levels, labour costs increase with building height.

Maintaining the wall surfaces of tall buildings is a challenge, so the designers tend to opt for materials such as aluminium and glass, known for high cost and high embodied energy, besides many other manufactured materials.If the walls are largely plastered and painted surfaces, their periodic repainting can be a humongous task, at great cost.

Higher we go lesser we get to see the ground-level gardens and lesser accessibility to them, actually an anti-thesis to the selling point, whereas in low-rise apartments, there could be a visible open area outside each unit.

In a multi-level apartment, construction is sequential with each slab casting, but in a cluster of low-rise houses, it can be parallel, saving project time. Smaller group of houses can form social spaces and human scale – possibly a reason stronger than that of eco point, to critically relook at high-rise houses.

In the current scenario of tax break on home purchase to individuals, the deduction of interest on home loan is restricted to Rs. 200,000 per financial year if the property is self occupied. The deduction is made under section 80C on repayment of housing loan taken from prescribed institutions and on payment of registration fee and stamp duty. It is also made under sections 54 and 54F from capital gains for reinvestment in a house.

Deduction of interest on loan taken for repairs or renovation or reconstruction of the house is restricted to Rs. 30,000 if the house is self-occupied. Section 80EE provides some additional tax benefit on interest of home loan. However, the benefit under this section would end in this financial year.

A deduction for payment of brokerage can be introduced in section 24 of the Income Tax Act, 1961 as many buyers are investors/ real estate brokers who lease their houses to tenants. To prevent misuse, deduction can be restricted to one month’s rental income.

An allowance for depreciation may also be provided for under section 24. With the amendment in Finance Act 2014, deductions under sections 54 and 54F on reinvestment in the house is restricted to the cost of one house only.

All these recommendations, if implemented, would provide additional incentives to home buyers and would definitely go a long way in increased demand in residential segment.

Talking of an innovative way to give tax breaks to individuals to encourage home purchase, the budget should allow increased deduction on housing loan. Deduction of Rs. 200,000 on interest of housing loan in tier 1 and 2 cities is not enough. Cities like Mumbai and Delhi needs a higher limit of deduction, say Rs. 500,000. For other major cities, it could be Rs. 400,000 and Rs. 300,000 for the rest of the cities.

≈ Comments Off on Government unlikely to yield major clauses on land bill

Despite the growing opposition to the proposed amendments to the land acquisition law, not just from the opposition parties but also from BJP’s allies and friends, the government appeared to be girding up for the faceoff as it has virtually decided that there won’t be any substantial changes in the bill, although it was ready to discuss the legislation with the opposition.

Prime Minister Narendra Modi said there cannot be any rollback of the amendments to the land acquisition law, and they should go to the people and explain to them that the new law was in their interest.

The sticking points are two provisions of the existing law that are sought to be dropped as they, the government claims, made any land acquisition virtually impossible. The first is the “consent clause” under which the consent of 70% of the land owners was required for acquisition, and the second is the provision for “social impact assessment” which mandates a larger study of social and economic impact of acquisition on land owners.

​Opposition parties, claim this proposed dilution of the law would make farmers vulnerable to hostile takeover of their land by corporates. Hence, they have dubbed the law “anti-farmers”, claiming sharp polarisation.
The ruling party is expected to tell farmers that their interests would be safeguarded as the bill has checks against the kind of “land grab” that was done during the UPA regime in the name of setting up SEZs. To the people at large, the party would explain that a workable land acquisition law was essential for industry to come up and hence for investments to come in. In turn, that would trigger growth and bring jobs and prosperity to a larger number of people.

≈ Comments Off on The disconnect between Budget and sector performance

Rumors regarding the budget affects trading and sector related performance and in most years rumors have turned out to be wrong. At other times there has been instances when the rumors turned out to be correct, but was fully discounted by the time reality dawned.

The NSE indices have indicated that the best performances in the past months were from Realty, FMCG, IT and Pharma sectors.

While Realty (47 plus %) and Pharma (48%) has beaten the Nifty Index (44%) the other sectors mentioned above were making slow progress.

The movement in the realty sector is based on hope that interest rates will come down. Tax clarity is expected on REITs(Real Estate Investment Trusts). That would make it easier for the cash-strapped sector to raise fund. Rumors are alive on the Budget introducing sops to encourage low-cost housing, in particular.

The other interesting factor is several high-return sectors have yielded negative returns in the past month. Banks (-4.7 per cent in past 30 days), finance (-2.6 per cent) have seen negative returns, for example. The biggest drag in this area has been PSU banks (-13.7 per cent). This could reflect unease about uninspiring results and high non-performing assets.

When Smart city is the mantra doing rounds and with a 100 slated to roll out in India, debates rage over whether ‘smart’ should be defined as technologically smart or services smart.

Universal access to services for both water and sanitation is at the heart of a water-smart city. No individual should be deprived of a connection on account of financial or legal conditions imposed on the consumer. Access to water and sanitation facilities will be a right of every citizen.

The right to a clean environment without pollution and one which is to be enjoyed for the soul as much as the body. Here the role of individuals and the community becomes crucial, in their various roles as voters, as citizens, as children, as social beings, as workers and as people who participate in activities for the reason of participation alone, their presence will become important.

Children need to learn about bio-diversity, create their play-space, decorate it with flowers, climb trees and simply enjoy themselves in a wide open space with water and birds.

Institutions such as the Corporation and the Lok Adalat can participate in restoring water bodies along with citizen groups. These groups can champion a local lake and be affiliated to it and also take pride in it as a community property.

Another issue these groups may face is that of sewage entry into lakes, the dumping of debris and garbage and the inability of managing the catchment.

What has to be noted is that the individuals in these groups are not experts but interested citizens with persistence and a vision to do the right thing. They eschew leadership politics and try to work as a group.

Biodiversity is enhanced and indirectly will ensure treatment of all waste-water in the city as well as recharge of groundwater. By ensuring that more and more people participate as solution seekers rather than merely problem identifiers, the city will create an army of people who will ensure the protection of the commons and the water bodies.

Such a water-literate community is what a smart water city should be all about.

Property developers in Chennai are shifting from the beaten path to develop housing on the OMR and ECR which are two stretches that run parallel to each other. While ECR known for its villas are now creating multi storey buildings, the OMR is witnessing the making of bunglows with high security.

Most buyers do not hesitate to buy a villa, as an investment, if it is reasonably priced since they could own a piece of land as well. The other USP is the lure of open spaces and with a little more cost, facilities that include swimming pools and clubhouses.

While OMR’s development is typically necessity-driven, ECR has always been the choice of those who look for great lifestyles and want to get away from the hustle and bustle of the city.

A lot of buyers from the IT and ITES industry, want to work on OMR and live on the ECR with its great ocean view and greenery. There is very less pollution here and the road is also being widened, so you can travel faster. Around 20 per cent of buyers are local investors and another 20 per cent are NRIs, who are used to a lifestyle with amenities and a view of the ocean.

ECR now has a restriction of stilt plus 4 floors height restriction on the buildings along the stretch slapped by the Directorate of Town and Country Planning. However, development along this stretch was possible only because of multiple land owners coming together with builders to develop vast stretches of land.

≈ Comments Off on Buy a home that does not lose its value over the years….

With developers pricing their new projects at a very high price and Realty fairs promoting these with much optimism, one has a clear answer to why property sales is in the dumps. Clearly, all of India has not turned crorepati yet and hence buyer are limited, for properties priced over 1 crore.

Developers seem to believe that their marketing prowess will help lure buyers with state-of-the-art amenities and design. This can be observed when a developer is selling apartments in an area not connected by proper roads to the main arterial road, for about a 50 per cent premium over older but well-constructed and well laid-out residences by top-notch developers on the main road. All for the promise of a ‘new’ living experience. And these are only promises, as most projects aren’t ready for possession.

This clearly is a time when buyers can look at the secondary market for a realty check on valuations. This will help them to make their decisions wisely as to whether their investment will hold good in the market place tomorrow.